Finance Videos

Jul 3, 2014 | 02:10

First national minimum wage for Germany

July 3 - Germany's lower house of parliament has approved the first nationwide minimum wage. Joanna Partridge asks why it is controversial and how it compares to other minimum wage rates around the world.

TRANSCRIPT +

A boost for the lowest paid in Europe's biggest economy.
Germany's parliament voted for the first national minimum wage - to take effect from 2015.
This was a flagship project for the Social Democrats.
They made their coalition deal with Angela Merkel's Christian Democrats dependent on the reform.
Andrea Nahles from the SPD is Labour Minister.
SOUNDBITE: Andrea Nahles, German Labour Minister, saying (German):
"We will also have regulations for implementing and controlling the minimum wage. On paper, the minimum wage is no use to anyone. It has to become a reality."
The minimum wage has long been controversial - and even now, it won't be available to everyone.
Under 18s, trainees and some interns aren't eligible - and the long-term unemployed could be paid less at the start of a new job.
Some sectors will be allowed to delay introducing it while they adjust.
Germany's minimum wage will be 8.50 an hour.
So how does that compare to other developed economies?
French workers earn at least 9.53 euros an hour, and it's currently the equivalent of 7.92 euros in the UK.
Over in the United States, the federal minimum is the same as 5.30 euros.
It's highest in Australia - equivalent to 11.25 euros.
Germany's been the euro zone growth motor since the financial crisis.
Despite that there some fear the gap between rich and poor is growing.
Employers' groups lobbied against the reform, saying higher labour costs would force them to move production abroad, or push up prices.
Richard McGuire is from Rabobank.
SOUNDBITE: Richard McGuire, Head of Rates Strategy, Rabobank, saying (English):
"Most companies in the tradeable sector, in the manufacturing sector, already pay more on average than the minimum wage anyway, but the most impact will be felt in the non-tradeables, in the service sector, so in terms of Germany's international competitiveness we certainly don't think it will have a negative impact near term. I think the bigger picture again though is that this is positive in terms of helping to engender this broader rebalancing of the euro area."
Germany's neighbours may be watching the reform closely.
France is among those pushing for growth intiatives - one, suggested by President Hollande, an EU-wide minimum wage.

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